These products, sold by wealth managers to their high networth individual clients, could have land or unfinished properties as underlying assets, with a buyback agreement after a certain number of years.
With a minimum investment of Rs 10-15 crore (Rs 100-150 million), these products are sold to a small number of HNIs.
Real estate developers, who are finding it difficult to get funding from banks, are raising money from wealthy investors through such products.
In one such product structured by the wealth management division of a domestic brokerage, four wealthy clients of the firm have invested Rs 10 crore (Rs 100 million) each in a portion of an unfinished property in Mumbai.
The developer has transferred this portion of the property in the names of these investors at almost half the prevailing market rate.
The developer has also signed a separate agreement with these investors to buy back the property after three years, with an annual internal rate of return of 20 per cent.
If the developer doesn't buy back the property after the lock-in period of three years, investors can sell this property in the market.
"Real estate structured products are becoming popular among HNIs within the alternate asset class category," says Rajev Sharma, country head (wealth management), Unicon Financial Intermediaries.
The commission for wealth management firms selling such structured
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